NEW BNM PROPOSALS TO BOOST INSURANCE SECTOR GROWTH
Source: Borneo Post Online, 19 November 2013
Bank Negara Malaysia’s (BNM) announced that the concept paper on life insurance and family takaful (LI and FT) released on November 7 may be the insurance sector’s re-rating catalyst. RHB Research Institute Sdn Bhd (RHB Research) highlighted this in a recent note and explained that the proposal’s focus on ensuring sustainable operating costs, enhancing disclosure and improving policyholders’ value proposition should collectively boost penetration, especially in the mass market. Key measures in the recent proposals include the introduction of the minimum allocation rate (MAR) to replace commission/operating cost limits (OL) on investment-linked (IL) products, partially-liberalising OL for pure protection products, boosting direct channels (walk-ins, online), promoting distribution channels (which are agents, banc assurance and financial advisers) and encouraging greater product transparency with enhanced disclosure requirements and web aggregators. RHB Research remarked that pure protection policies are to have commission-free offerings via direct channels. These are estimated to be 20 to 30 per cent cheaper than similar products sold through intermediaries. It sees this as a win-win for customers and insurers as it will boost insurance penetration in the mass market, while allowing savvy, educated customers to purchase pure protection products directly or via an intermediary. It also expects agencies to retain their role in servicing middle to high-income customers.